China may end up inadvertent winner from Trump's aluminum tariffs
S E E D E D C O N T E N T
LAUNCESTON, Australia (Reuters) - It’s probably not what U.S. President Donald Trump had in mind when imposing tariffs on aluminum imports, but it looks likely that some of the big winners from the 10 percent import tax will be China’s producers.
While Chinese aluminum companies now face the same tariff obstacle as other exporters to the United States, they appear better placed to benefit from some of the (most likely) unintended consequences of the Trump administration’s policies.
The Trump tariffs and measures against major Russian producer Rusal, along with a strike at Alcoa’s alumina and bauxite operations in Western Australia are combining to roil aluminum markets.
Throw in Trump’s move to double the tariff on aluminum from Turkey and the result is a market that was most likely in a small supply deficit this year is now more concerned about the risk of supply disruptions.
Rusal, which produced 1.87 million tonnes of aluminum in the first half, is a major supplier not only to the United States, but also to other countries around the world.
It is reportedly concerned that it will have to halt production or stockpile output if an agreement on U.S. sanctions against it cannot be reached.
The Trump administration has given Rusal’s U.S. customers until Oct. 23 to end their business with the Russian company.
If no deal is reached to extend, or amend, that deadline, the aluminum market is likely to face severe disruptions as Rusal’s output is blocked from world markets.
The Trump tariffs are also hurting the U.S. aluminum producers they are designed to help, with Alcoa asking for an exemption from the tariffs because it imports essential aluminum products from its facilities in Canada.
Alcoa said in July it will incur as much as $14 million a month in extra expenses, mainly from tariffs levied on aluminum imported from Canada, its biggest supplier.
If Rusal is largely blocked from the global aluminum market, and if strikes do translate into supply disruptions, there are very few producers currently able to take advantage.
CHINA BEST-PLACED?
China’s aluminum producers do have spare capacity, and assuming they can work their way around some of the pollution measures, they are able to make more of the lightweight metal, used in products such as beverage cans and motor cars.
Global aluminum output was 5.321 million tonnes in June, down 2.2 percent from the previous month, according to figures released on July 20 by the International Aluminium Institute.
However, China’s aluminum output, which is more than half of the global total, ramped up in June to 2.83 million tonnes, up 1.6 percent from the prior month, according to official figures.
Daily production in June was about 94,000 tonnes, the second-highest on record, according to Reuters calculations based on data available from the National Bureau of Statistics.
China’s smelters are responding to a rising domestic prices, with benchmark Shanghai futures up 5 percent from the recent low in mid-July to the close of 14,520 yuan ($2,110) a tonne on Aug. 10.
While the U.S. tariffs on aluminum imports have only been in effect since the start of June, they don’t appear to be hurting Chinese exports as yet.
Exports of unwrought aluminum and products surged to the second-highest on record in July, coming in at 519,000 tonnes, according to preliminary trade data released on Aug. 8.
This was up 18 percent from the same month in 2017, and year-to-date exports are 13.6 percent higher than for the first seven months last year.
This data doesn’t suggest the Chinese aluminum sector is struggling, the main issue for them will be attempting to maximize output while complying with a new round of pollution restrictions.
However, newer and more efficient smelters may help China produce more aluminum at a lower cost, while also reducing the emissions intensity per unit.
When Trump launched his initial steel and aluminum tariffs he tweeted that “trade wars are good, and easy to win”.
For aluminum, his actions have so far disrupted supply chains, angered the top producer in his own country, increased manufacturing costs in the United States and elsewhere, and possibly made his No.1 target, China, the main beneficiary.
Editing by Joseph Radford
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With multi national corporations and world wide supply chains unintended consequences are easy to come by and have devastating effects.
This may be one.
Left hand... meet right hand!
There you go.
Is Trump shooting America in the foot?
Yes, with this gun,
Sadly in many cases that may be true.
For now just wait !!
LOL, love it, yer guns bigger than mine.
Some of the tariffs are really going to bite some American businesses, and hard.
Perhaps, time will tell but at this time many Americans dont care as long as president trump doesn't shoot them in their wallet.
Some are already being shot in the wallet.
I do know what you mean though steve.
Not to worry the talk is a government bailout is in the works to help trump voters caught in the crosshairs.
$12 billion for the farmers thus far. Now the dairy farmers, cheese makers, fishing industry, all part of the sea food industry and the nut growers who are going to loose a hell of a lot of their business.
Forgot to add the newpaper business. Their costs are skyrocketing because of the tariffs on Canadian lumber.
The list will keep going on and on and on as long as this trade war lasts.
It OK trump has a lot of money at his disposal these days ya know. Bailouts for everyone.
lol sarc !
Sooo, is he going to put Oprah in charge of handing out the bailouts? BAILOUTS FOR EVERYONE, YOU GET A BAILOUT, YOU GET A BAILOUT...….
LOL Yep !!! reminds me of this.
Karn Evil 9
Welcome back, my friends
To the show that never ends
We're so glad you could attend
Come inside! Come inside
There behind a glass
Stands a real blade of grass
Be careful as you pass
Move along! Move along
Come inside, the show's about to start
Guaranteed to blow your head apart
Rest assured you'll get your money's worth
The greatest show in Heaven, Hell, or Earth
You've got to see the show, it's a dynamo
You've got to see the show, it's rock and roll
Right before your eyes
We'll pull laughter from the skies
And he laughs until he cries
Then he dies, then he dies
You've got to see the show, it's a dynamo
You've got to see the show, it's rock and roll
Soon the Gypsy Queen
In a glaze of Vaseline
Will perform on guillotine
What a scene! What a scene
Next upon the stand
Will you please extend a hand
To Alexander's Ragtime Band
Dixieland, Dixieland
Roll up! Roll up! Roll up
See the show
Performing on a stool
We've a sight to make you drool
Seven virgins and a mule
Keep it cool. Keep it cool
We would like it to be known
The exhibits that were shown
Were exclusively our own
All our own. All our own
Come and see the show
Come and see the show
Come and see the show
See the show
See the show
Perfect.
LOL.. I always loved that song.
As an independant type person who played the drums it had some special meaning.
Will you please extend a hand
To Alexander's Ragtime Band
Dixieland, Dixieland
We would like it to be known
The exhibits that were shown
Were exclusively our own
All our own. All our own !!
Yes, it's pretty infuriating that his base is alright having him waste tax payer's money on a bailout for a situation that he created.
He's going to bankrupt the country just like he did his businesses.
And the bailouts, and there will be a lot more I'm sure, are funded by...........YOU - i.e. taxes.
Dear Brother Kavika: Playing to a base isn't the same thing as leadership or statesmanship.
E.
No it isn't niijii...This may become a really hard lesson for some to accept.
Well, saving up aluminum cans for recycling is a bust. Mr G took in 80 pounds of cans the other day and only 50 cents a pound. About 8 years ago my boss and I got 75 cents a pound
Another retirement plan up in smoke.....
China will have an economic collapse soon. They artificially inflate their economy through currency manipulation and construction projects that serve no purpose other than to provide a job. Empty buildings everywhere. The question is how much will it impact the world when that happens
I doubt they will have economic collapse anytime soon. Their trade with the EU and inter Asia is larger then their trade with the U.S.
They have construction projects all over the world. Currently their foreign reserves are $4 trillion.
They have hundreds of billions of dollars in loans to a number of countries. Their assets are overwhelming.
Collapse was to strong a word. A market correction is more appropriate. It won't be as bad as say Greece... but those foreign construction jobs can and will dwindle. The foreign reserves while the largest of any country (I believe) ... if need be thy could burn through that fairly quickly. Their economy is artificially inflated badly.
That is possible, and if it happens we will have a problem as well. Their construction world wide are long term projects some into 5 years or more into the future.
If their economy is overly inflated they will have a debt crisis. They will be able to handle it but it will hurt. At the same time the world wide fall out will hurt everyone, including the U.S.
Are you talking about China or the US?
They do have one advantage, they don't really have to worry too much about the poor rural people. With the way their government is run, they can ignore them for some time, Trump and the GOP do not have that same amount of time or insulation from accountability. I imagine China is betting (I would be) that American voters get tired of this before the poor in China get dangerously angry about it.
I don't foresee a revolution any time soon from where I stand. Not only are the poor not particularly unhappy with their lot in life, but they are accepting of it. Not only that, the Chinese government is putting a lot of emphasis on improving their lives. A middle class is growing by leaps and bounds. We meet those in menial jobs virtually every day - my wife always has a kind word for them, and there is never a complaint, but a cheerful response. An example I recall from YEARS ago was when the government provided 50% subsidization for appliances such as new refrigerators, TVs, washing machines, air conditioners, microwave and toaster ovens, fans, heaters, etc. for those with modest incomes - not only did that benefit the poor, but also the manufacturers and retailers.
As well, the government provides work by NOT automating certain services. I once wondered why I saw so many people with brooms doing the cleaning when machinery would do the job so much faster and easier, until I realized that all those people with brooms were being PAID.
Although opinions are formed by propaganda and reading biased news coverage (regurgitated in the words I read here on NT) I see what's happening here with my own eyes, and IMO Kavika has the most intelligent things to say about what's happening in China.
One of the important things that you stated Buzz was the the middle class is growing by leaps and bounds...There is the strength in the Chinese economy. One thing that will be very important to China is that the domestic growth keeps going and growing.
They are investing billions of dollars in infrastructure yearly. This will help the domestic growth and the lives of the people.
MUVA, China produces 60% of the worlds aluminum.
31,000 MT vs the US 840 MT.
China seems to be growing all around.
I have read reports about the growing middle class there.
Taking care of themselves and their people as well as their many overseas operations going on, I don't see them having a down turn any time soon.
Their interests are in every continent around the globe.
MUVA, in 1985 76% of Chinese lived in rural areas, today a little over 50% are urban. The migration within China in 20 plus years and the changing from a agri culture to a production has been nothing short of a miracle.
Xi seems to have a excellent relationship with the rural people and has done a lot for them. Yes, there is poverty and they seem to be working on that.
When you talk of a country with a population of 1.4 billion there are going to be problems at every level. They have seemed to have done well with the problem. Of course like any large industrialized country problems will always pop up.
IMO China has to do two things to keep expanding. Increase domestic demand and to keep the economy growing. If they do those two things they are going to be difficult to be in any trade war.
But not necessarily unhappiness.
Yes, there is poverty, but as I've pointed out, the government is working on it, and it's changing. There is poverty in the USA as well, as there is in any country, but when there is a total of 1.4 billion people a similar percentage as other countries makes a total that appears to be greater and more obvious.
As I am a Canadian, I'm a believer in universal free health care, having received its benefits for most of my life - China isn't there yet, but I bet it will happen a lot faster than it will in the USA.
I think that many Americans think if we ''win'' a trade war with China we've cured our deficit problem. When you compare our trade deficit with China and our GDP, it's really a tiny amount.
The area that should be of the utmost importance is our intellectual property. That's what it's all about. It may be to late now, but it's, IMO, more important to protect our intellectual property than have a even dollar trade with China.
China's economic collapse?
Better rethink some of that.
1. China will cease 'investing' in US Treasury Bills.
2. China will cash in the TB's they currently hold and...………….badass ouch for American economy.
Trade wars are stupid and only a moron starts one, especially in an interconnected global economy.
I may rarely agree with you, Thrawn, but in this case I do.